Posts from Friday May 3 2013

US payroll income growth: positive, steady, not steep enough

Chart via Carl Lantz of Credit Suisse. Read more

Tarullo’s speech on capital and regulation

Fed governor Dan Tarullo’s speech Friday on bank capital and regulation could well invigorate the same amount of public discussion as Jeremy Stein’s speech on the role of monetary policy and asset bubbles did.

Tarullo’s comments that the Basel III leverage ratio was perhaps “set too low” and that he might prefer tougher capital standards for the largest banks are likely attract particular attention. Read more

Nowotny on Draghi and negative rates: “purple monkey dishwasher”

From Reuters:

LONDON, May 3 (Reuters) 13.04 – The euro pared gains while German Bund futures edged up on Friday after European Central Bank policymaker Ewald Nowotny said the central bank was open-minded about taking deposit rates into negative territory.

Nowotny said he was “astonished” by the market’s reaction to his comments earlier in the day, when he said negative deposit rates were not relevant in the near term.

 Read more

April payrolls: +165,000, unemployment down to 7.5 per cent

The post-winter slowdown that the US has experienced the past three years had been showing signs of re-emerging in 2013, but Friday’s employment report complicates the story.

The BLS announced that payrolls climbed by 165,000 in April, but perhaps more importantly the revisions to prior months revealed that February and March were better than originally thought, having created 114,000 more jobs than had been posted in the earlier reports. The February revisions brought the total for that month to an impressive 332,000. Read more

Gold, backwardation and the ‘time cost of money’

The gold market has always been partial to “carry trades”. But in the post 2008 world the nature of the carry-trade has changed.

In collateral terms, whereas gold mostly traded on “special” terms before 2008 — because you had to pay to borrow it — meaning it was privy to more of a “stock lending” profile, post 2008 it went fully into “collateral” mode. Read more

Markets Live: Friday, 3nd May, 2013

Live markets commentary from 

The (early) Lunch Wrap

CCPs, too big to fail || Mind the red metal || Big eurozone countries bust through deficit limits || Obama nominates commerce secretary || #IPO #Speculation @Twitter || Intel’s new chief exec in waiting || LinkedIn shares dive on guidance, #in || BNP Paribas profits down on falling IB revenues || Goldman’s sweet tax deal in the UK || Slovenia issues bonds || Market update Read more

Ring around the clearer, acts like a mirror. Default! default! They all fall down

What happens when one bank defaults across six CCPs? The remaining members will have to pick up the bill. Given that they are almost certainly members of the other CCPs, this will result in a default contribution bill so large it could potentially lead to their failure also.”

That’s Gary Dunn, senior manager for regulatory and risk analytics at HSBC, being quoted by Risk at Isda’s AGM last week. Given the increasing concentration of risk in central counterparties, he thinks that they would ultimately have to be bailed out by taxpayers, after the CCP’s buffers were exhausted. Read more

Further reading

Elsewhere on Friday,

– Oh, yes, it’s the shared office printer.

– The Macro Man would like to introduce you to the new one euro coin.

– Economists did a bad job predicting the crisis. How have they done since?  Read more

The 6am Cut London

Asian stocks rose for the first time in three days as investors awaited the release of US jobs data and reacted to the ECB’s rate cut. Metals gained, while the dollar weakened. The MSCI Asia Pacific ex Japan was 0.2% higher, the Hang Seng rose 0.7%. Japan’s markets are closed. Bloomberg’s analyst survey median forecast is for a 140,000 gain in April in official US payrolls later today. (Bloomberg)

RBS to send clearest signal on reprivatisation: Sir Philip Hampton, chairman, will announce today that the bank will be ready to start preparing information on a share sale as soon as next year. RBS had previously indicated that next year would be a suitable time to consider the future of the government’s 82% stake. Although this announcement will be the strongest signal yet that RBS is on the final stretch of its massive restructuring, Sir Philip will not be calling on the government to begin a reprivatisation. (Financial TimesRead more